Craft Breweries: Risk and Insurance concerns
There are numerous establishments that serve some alcoholic beverages and food to a niche clientele. Any place were more than 50% of receipts are from the sale or alcohol would under the heading of Bar, Tavern, Lounge, Nightclub for insurance purposes, however, craft breweries are different. Craft breweries will have different risks and insurance needs based upon the different business model, clientele, etc.
I think the differences between craft breweries and other establishments, is a significant part of why the growth in Craft Breweries and Craft Beer restaurants has been impressive in the last few years. According to the Brewers Association, the U.S. craft beer market was $19.6B in 2014, which is 11% of the market share, and up 22% in dollar sales growth from 2013.
The difference should be embraced.
With this impressive growth comes increased risks.
The insurance business is designed to transfer that risk from the business owner to the insurance company to allow for growth. I’d imagine from an industry insiders point of view, there would be huge upside potential to this growth area – especially a portfolio of craft breweries that could diversify and then lower the risk of just writing one or two individual risks. Similar to the image below with investment diversification, risk C and Risk D would ideally not have a risk at the same time, therefore helping increase the returns, lowering the risk for the insurance carrier. This principle would be done on a much larger scale then 2 risks, but you get the point.
The problem is finding the niche or specialty insurer who recognizes the differences between Craft breweries vs. bars or restaurants. And provides value added based upon that specialty.
Knowing what to look for when designing your business, what risk controls to put in place, and how to communicate that information to your insurance company is a learning process. It is important to differentiate your craft brewery business from the Bar/nightclub and highlight these differences. Some of the largest risks to anyone serving alcohol, including Craft breweries, is liquor liability which the laws vary state to state.
Other risks include:
- General liability exposures
As the Craft Brewery typically has cash on hand, liquor in stock is sometimes flammable, as well as these establishments attract large foot traffic. At least the one’s by me are regularly crowded.
Questions to think about
These are some(not all) of the risk related questions to think about when starting your brewery or restaurant:
- Are there a sufficient number of fire exits?
- Are the exit signs easy to find in the event of an emergency?
- Is there an emergency plan in place in the event of a fire?
- Are employees trained and required to practice emergency plan?
- Is a crowd manager on hand for all events?
- Is the parking lot well lit? Are there security cameras?
- Are visible signs posted to alert patrons about Taxi services?
- Are the servers trained in responsible alcohol serving courses such as TIPS or ServSafe Alcohol?
- Are security personal permitted to use chemical weapons, physical force, or restraints (i.e. pepper spray, handcuffs)?
- Are decorations placed away from fire sources (outlets, lighting fixtures, etc)?
- Who owns the liquor license?
Either a new or existing craft brewery will have to think about these issues throughout the course of business.
I have ideas and resources to help lower your total cost of risk, and focus on growing your business – feel free to go to the contact us page and write me if you have additional questions.
I will be available to taste test product as well…ha-ha
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